04:40
Faizan
Probate is the legal process of tying up the loose ends of a decedent's life. Not only does it transfer his property to living beneficiaries, it also attempts to ensure that everyone he owed money to receives payment. On the surface, this sounds simple enough and it can be – when the decedent leaves a will, when his assets are straightforward, and when his debts are limited. But California is a community property state, so even simple estates may become complicated if the decedent was married.
Community Property Rules
Community property is anything a married couple purchases with earnings or acquires during the time they're married, with the exception of gifts and inheritances made solely to one spouse. Community property law also applies to debts incurred during the marriage – each spouse is equally responsible for paying them. When a married individual dies in California, his spouse technically becomes responsible for all the couple's community debt – unless his estate is probated. Under California law, the probate process relieves the surviving spouse of responsibility for half the debt – her spouse's share. By probating the estate, she can eliminate some of her personal liability by legally allocating her spouse's share of marital debt to his estate.
Probate Exceptions to Community Property Rules
Under California law, some debts are not considered community debts for estate purposes, even if they were incurred during the marriage. These include bills associated with the decedent's final illness, as well as costs relating to his funeral or burial arrangements. Debts he incurred before marrying are the sole responsibility of his estate; his spouse does not share in these.
Estate Liability
A decedent's estate is comprised of his half of the community's assets, plus his own separate property – that which he owned before marrying or received by gift or inheritance. In California probate, the decedent's portion of marital debt must be paid through this estate and from these assets. Sometimes this means selling property to raise the cash. If a community asset is sold, half the proceeds must go to his surviving spouse – his creditors have no claim to this portion. If the decedent was not married, all his probate property is available to pay his debts. Probate property includes anything he owned that doesn't transfer to a living beneficiary in another way. For example, life insurance policies and retirement accounts usually go to named beneficiaries. These would only be part of the decedent's probate estate, and available to pay his debts, if he named his estate as the beneficiary.
Order of Payment
After cash is raised – or if the decedent left liquid accounts so cash is readily available – California law pays his creditors in an order of priority. The list begins with expenses incurred in settling his estate, followed by debts that are secured by liens against property, such as a mortgage. His funeral expenses and costs of his last illness are paid next, and unsecured debts – such as credit cards – bring up the rear. If the money runs out before these creditors receive anything, they're not paid. If the decedent's share of community property is not sufficient to pay for his share of community debt, or he wasn't married and his own assets won't stretch that far, the estate is said to be insolvent.
Insolvent Estates
When a California estate is insolvent, its beneficiaries do not receive anything – all debts must be paid first, and beneficiaries only inherit if money or assets are left over after this is accomplished. If the decedent was married, however, one of the allowable deductions from his estate is a living allowance for his spouse and minor children. The court must authorize this allowance, but it is paid before any unsecured creditors receive money. The court also has the right to withhold the decedent's home from sale for a period of time to provide for the decedent's family.
Community Property Rules
Community property is anything a married couple purchases with earnings or acquires during the time they're married, with the exception of gifts and inheritances made solely to one spouse. Community property law also applies to debts incurred during the marriage – each spouse is equally responsible for paying them. When a married individual dies in California, his spouse technically becomes responsible for all the couple's community debt – unless his estate is probated. Under California law, the probate process relieves the surviving spouse of responsibility for half the debt – her spouse's share. By probating the estate, she can eliminate some of her personal liability by legally allocating her spouse's share of marital debt to his estate.
Probate Exceptions to Community Property Rules
Under California law, some debts are not considered community debts for estate purposes, even if they were incurred during the marriage. These include bills associated with the decedent's final illness, as well as costs relating to his funeral or burial arrangements. Debts he incurred before marrying are the sole responsibility of his estate; his spouse does not share in these.
Estate Liability
A decedent's estate is comprised of his half of the community's assets, plus his own separate property – that which he owned before marrying or received by gift or inheritance. In California probate, the decedent's portion of marital debt must be paid through this estate and from these assets. Sometimes this means selling property to raise the cash. If a community asset is sold, half the proceeds must go to his surviving spouse – his creditors have no claim to this portion. If the decedent was not married, all his probate property is available to pay his debts. Probate property includes anything he owned that doesn't transfer to a living beneficiary in another way. For example, life insurance policies and retirement accounts usually go to named beneficiaries. These would only be part of the decedent's probate estate, and available to pay his debts, if he named his estate as the beneficiary.
Order of Payment
After cash is raised – or if the decedent left liquid accounts so cash is readily available – California law pays his creditors in an order of priority. The list begins with expenses incurred in settling his estate, followed by debts that are secured by liens against property, such as a mortgage. His funeral expenses and costs of his last illness are paid next, and unsecured debts – such as credit cards – bring up the rear. If the money runs out before these creditors receive anything, they're not paid. If the decedent's share of community property is not sufficient to pay for his share of community debt, or he wasn't married and his own assets won't stretch that far, the estate is said to be insolvent.
Insolvent Estates
When a California estate is insolvent, its beneficiaries do not receive anything – all debts must be paid first, and beneficiaries only inherit if money or assets are left over after this is accomplished. If the decedent was married, however, one of the allowable deductions from his estate is a living allowance for his spouse and minor children. The court must authorize this allowance, but it is paid before any unsecured creditors receive money. The court also has the right to withhold the decedent's home from sale for a period of time to provide for the decedent's family.
Posted in: Estate Laws
